In this quarter’s Legislative Update, we highlight key political, legislative, and regulatory developments that may impact our industry.
New York State
Proposed New York State Budget
The 2026 New York State legislative session began on Jan. 7, and shortly after Governor Kathy Hochul released her proposed 2026–27 budget totaling $260 billion, a 3.2% increase over the current budget. Several provisions included in the budget could affect health plans and employers. We’re closely monitoring each of these items and assessing their impact if they become law.
- Changes to New York’s Essential Plan: To preserve coverage for 1.3 million individuals, New York State is seeking the Centers for Medicare & Medicaid Services (CMS) approval to revert to the Basic Health Program (which was created as a part of the Affordable Care Act). Currently the state operates New York’s Essential Plan under the 1332 waiver. This would still mean that 460,000 enrollees could lose eligibility due to the return to the 200% Federal Poverty Line income limit.
- Hospital Cooling Off Period (for contracting impasses between insurers and hospitals): Extends the cooling off period from two months to 120 days. This is a required waiting period during contracting impasses in which the hospital must stay in network, and patients can continue to see their providers without disruption. This also extends the cooling off period to hospital-owned practices.
- Prior Authorization: Requires health plans to report prior authorization volumes, approvals and denials, appeals, and the top CPT codes requiring authorization to the Department of Financial Services (DFS) for inclusion in the Consumer’s Guide to Health Insurance. This also prohibits plans from requiring prior authorization more than once per year for ongoing treatment of chronic conditions.
- Access to Specialty Care: As part of prior authorization reforms, the budget proposes extending continuity-of-care protections to 90 days and throughout pregnancy and the post partum period for members who are new to a health plan. It also removes the requirement that a patient’s condition be life-threatening or disabling and maintains the requirement that out-of-network providers accept in-network plan rates during this period.
- Independent Dispute Resolution (IDR): The proposed changes to New York’s IDR process would clarify how fees billed by providers in emergency situations and surprise billing cases are evaluated for reasonableness. While claims paid under a fee schedule would still be excluded, the proposal also confirms that surprise bills to Medicaid managed care plans are currently allowed. The Executive Budget now seeks to align state law with federal law by explicitly excluding Medicaid from the IDR process.
- Disclosure of Formularies: Requires health insurers’ drug formularies to be publicly accessible online without login credentials.
- Biomarker Testing: Limits Medicaid biomarker testing to medically necessary services.
- Safety Net and Rural Health Funding:
- Continues funding for the Safety Net Transformation Program, which helps Safety Net hospital partners with other organizations and provides support for both operating costs and capacity needs.
- Establishes a Rural Health Transformation Program to support rural providers with integration efforts, expanding telehealth, improving access to primary care, strengthening the workforce and upgrading technology – without requiring competitive bidding.
Changes to Provider Taxes
Additionally, CMS finalized a rule removing New York’s authorization for its Managed Care Organization (MCO) tax -- a per member, per month of tax on enrolled individuals. Previously, this tax increased the state’s Medicaid funding. The state will have a transition period until the end of 2026.
Federal Updates
Federal Budget Package
In January, the Senate approved a large government funding bill that covers most federal agencies until Sept. 30, 2026. The package does not include COVID-era enhanced Affordable Care Act (ACA) subsidies, and separate legislative efforts to continue the enhanced subsidies have not advanced.
The Great Healthcare Plan
President Trump’s Great Healthcare Plan, released earlier this year, outlines what the administration describes as a policy framework aimed at reducing healthcare costs, enhancing transparency, and reallocating federal health funding to individuals instead of insurers. The proposal is preliminary and would require congressional action to determine how these policy ideas would be implemented. We continue to monitor the plan’s development and evaluate potential impacts on our organization and our customers.
Healthcare Transparency Regulations
CMS also recently announced two proposed rules aimed at increasing transparency within the healthcare industry. One rule updates an existing requirement for health plans to share provider pricing information. The other rule addresses how pharmacy benefit managers (PBMs) and related service providers report their fees. This proposed rule has significant overlap with the requirements and components of the recently passed appropriations package. We are working to provide feedback on this rule to minimize administrative burden and confusion.
Drug Pricing
There is continued focus on lowering prescription drug costs, boosting price transparency and aligning U.S. drug prices with those in other developed countries.
The Federal Trade Commission (FTC) recently reached a settlement with Express Scripts (ESI) and affiliated entities requiring changes to its Pharmacy Benefit Manager (PBM) practices with the goal of reducing patient drug costs. The changes required as part of the settlement are structured with multiyear implementation timelines, including external monitoring and FTC compliance reporting through 2028. FTC proceedings continue against CVS, Caremark and OptumRx, signaling that additional PBM reform across the market is still ahead.
The Trump Administration is prioritizing policies that expand market competition, enhance direct‑to‑consumer purchasing options and leverage federal negotiating power to make medications more affordable. The administration announced that 16 of the 17 largest pharmaceutical manufacturers have signed Most‑Favored Nation (MFN) pricing agreements with the White House. While the agreements do not produce immediate patient cost relief, they serve as a short‑term policy motivator for manufacturers as the Administration attempts a broader restructuring of U.S. drug pricing.
TrumpRx.gov, a website launched in February that is like GoodRx® and LillyDirect®, is designed to provide information about how to access a variety of drugs at a potentially lower cost but does not sell or dispense drugs. It is intended to help Americans search for prescription medications and purchase them using their own funds through external sources like traditional pharmacies or manufacturer-operated websites. It is not associated with any specific pharmacy or drug manufacturer.
